This tax season you may have more to worry about than how much you owe. A new study from Identity Finder finds the IRS is not properly protecting social security numbers in some tax returns.
Personal tax returns are not public, but the tax returns of non-profit organizations are public domain. Identify Finder used the OCR (optical character recognition) module of its Sensitive Data Manager software to analyze nearly four million publicly available tax return image or PDF files ranging from 2001 to 2012.
The research revealed an alarming failure to safeguard sensitive data. Identity Finder uncovered an estimated 630,000 Social Security numbers exposed online in form 990 tax returns.
The most affected group were tax preparers--many of which used their personal SSN rather than their PTIN (preparer tax identification number). However, directors, trustees, employees, donors, and scholarship recipients were all impacted as well.
The sensitive data on the publicly available tax returns is not limited to Social Security numbers, either. Some of the tax returns analyzed by Identity Finder included scholarship recipient names, complete addresses, and detailed transaction information.
We can't blame the IRS--at least not entirely. There is no requirement within a form 990 for a Social Security number to be provided in the first place, and the IRS document is clearly labeled "Open to Public Inspection" as a warning that the information will be available to the general public. However, careless tax preparation and a lack of oversight by the IRS has resulted in an online treasure trove of information that cybercriminals covet.
An identity thief could sift through the nonprofit organization tax returns and uncover the same data that Identity Finder discovered in this study. Armed with names, addresses, and Social Security numbers, an identity thief can wreak havoc on a person's life and destroy their credit rating.
The Identity Finder report includes a number of recommendations. First, organizations that have filed form 990 tax returns should review the information to determine if any sensitive data is exposed online. If it is, the affected individuals should be warned that their personal information is part of the public record and that they may be at increased risk of identity fraud.
Identity Finder also suggests that nonprofit organizations be more vigilant about ensuring that sensitive data doesn't get needlessly recorded on the form 990 tax return. Also, tax preparers should use their PTIN instead of their personal SSN.
Finally, Identify Finder believes that the IRS should take steps to redact or scrub the sensitive data that is already posted online. Identity Finder suggests that, moving forward, the IRS use a tool like the one it used to produce this report to analyze documents for sensitive information before making them available to the public online.